Ohio's Bad Idea for Boosting Welfare-to-Work
Without any thought to unintended consequences, Ohio legislators have created a damaging pay-for-performance welfare-to-work program.
When welfare reform passed in 1996, Ohio -- like virtually every other state in the union -- saw rolls plummet. The huge washout was attributed to the new work requirements in the law, suggesting that there definitely was something to the conservative argument that plenty of welfare recipients were ready and able to work. Today, it's taken on faith that the system was, indeed, carrying thousands of free riders.
Then last year Ohio -- for the first time in 18 years -- started to see rolls climb, a function most likely of the effects of the Great Recession. The reversal got the attention of Republican Senate President Keith Faber, who late in the 2014 session added a provision to the state budget that would give welfare caseworkers bonuses for moving clients from welfare to work. Under the Faber plan, five counties will be chosen to participate (currently it's not clear how they will be selected).
On its face, this seems like a good, old-fashioned and sensible run-government-like-a-business notion. Not only will it incentivize caseworkers to hustle, but it may illuminate some particularly successful tactics in finding folks jobs. It's also not an unheard of notion. There are numerous welfare-to-work programs run by nonprofits that operate on a pay-for-performance basis. Providers get a certain amount upon evaluating a client's skills and needs, a certain amount upon training, some more upon placement, and even further payments for clients who stay in their jobs for six months, a year, two years and so forth.
But here's where the Ohio plan breaks down. The well-designed pay-for-performance plans run by nonprofits account for some key variables, including the skill level or employability of clients (in order to prevent "creaming") and the economic environment in which the task is being tackled. It's one thing to pay bonuses in areas with relatively healthy economies and clients who are pretty much ready to roll, it's quite another in places where the region is struggling and the clientele is especially challenging. But Ohio's deal is typical of how way too many state legislators think about "performance": It starts and ends with the bonus. Legislators didn't bother to ask whether caseworkers would cream. They didn't wonder: Will they try to shove clients into the first available, if not altogether appropriate or promising job? Will caseworkers simply reject folks who really do need assistance because their job prospects seem particularly dim?
Another part of the Faber scheme that's just as suspect is the proposed ranking of the state's 88 counties by welfare-to-work performance. Unless Sen. Faber has some fabulously sophisticated algorithm that takes into account the relative work skill challenges faced by clients from county to county, and another complex formula for gauging the relative availability of appropriate jobs, it's a completely unhelpful way to go about improving how counties prepare clients for work. Actually, it's worse. The only thing that kills performance measurement programs faster than using numbers to beat up on workers is to rank performance in areas that the rankees have virtually no control over.
Most damaging of all, though, is that once the rank and file have been subjected to this sort of ill-conceived, shoot-from-the-hip type of policy, it makes it even more difficult for any legislator who actually wants to institute a sensible, effective, thoughtful performance measurement program to get one up and running.